Ever thought what makes a stock price to move? Why does a stock move so wildly on some days? Why is there is a huge interest in a particular stock or penny stock on certain days? In this article, we will look at some of the factors that affect stock price and how you can use some of these factors to make buy and sell decisions.
Earnings Release- Most stocks will see a great deal of activity before and after their earnings release. All listed companies release their earnings every three months. Generally companies that are expected to report strong earnings will see some huge buying activity starting a few days before the actual announcement and vice versa. The stock price will see some big changes on the day of the actual announcement. For example, let us say that Banco do Brasil is about to report its earnings in a week’s time. Now, if the street consensus is for the company to report strong earnings, then it may be good idea to build position in the stock before the actual earnings announcement. If the company does report strong earnings, its stock will see some price appreciation on the day of the announcement, giving you a chance to make a decent return in very short period of time.
News of a Possible Deal- A company’s stock can see some huge activity and price movement, if the market anticipates a potential merger or an acquisition. In this case, both, the company that investors speculate will be acquired and the company that investors speculate will make the acquisition will see some price movements. Once a deal is announced, the stock of the company that will be acquired, generally, sees a big intra-day jump.
Company Related News- Apart from earnings release and M&A, other company related news such as the acquisition of a new client or the loss of an existing client, expansion into new markets etc also have an impact a stock’s price.
Competitor News- A company’s stock may also move on any news or development relating to its competitors. For example, if Vale S.A reports a positive quarter, this will have a positive impact on the stocks of other companies in the same sector. This happens because investors believe that if company in a particular sector has reported a positive quarter, other companies would also have had a positive quarter.
Economic Data- The release of economic data such as GDP, unemployment data, retail sales figures, consumer confidence etc will also have an impact on a stock. For example, if there is a release of weak data for retail sales in a particular month, all retail stocks will likely fall once the announcement is made.
So we have here some of the factors that can impact the price of stock. It is very important that active investors keep an eye on these factors all the time.
